In its latest monetary policy review, the central bank of India has announced a reduction in the repo rate by 25 basis points from 7.5 per cent to 7.25 per cent in order to improve liquidity and boost falling economic growth in the country.

It was expected that the Reserve Bank of India would cut its key lending rates to boost the economic growth after a prolonged period. The industry members have been demanding a rate cut since several months. The RBI had been holding high interest rates in the country to control rising inflation but many believe that this has resulted in falling economic in the country.

The Indian economy is facing inflationary pressures, slow growth in GDP, worsening balance of payment situation including the current account deficit and liquidity constraints. The government's finance ministry has been taking steps to relax norms to boost foreign investment into the country.

The central bank kept the reverse repo rate and the Marginal Standing Facility unchanged at 6.25 per cent and 8.25 per cent respectively. The RBI aims to control inflation and boost growth in the economy through changes in its key lending rates.